Most traders know that a buyout is one of the easiest ways for a stock to shoot up 20% or more overnight. When a public company gets acquired, the buyer often pays a significant premium over the market price, leading to instant gains for shareholders.
The bad news is that these buyout announcements are often difficult or impossible to predict. The good news, on the other hand, is that buyout rumors can be just as tradable as actual buyout bids.
Rumors swirl around Wall Street all the time. Often, it doesn’t even matter if the source of a rumor is known or credible; word-of-mouth gossip can be enough to send a stock soaring. But, once a buyout rumor starts, traders must decide whether to take profits or ride it out and wait for official news.
In the past month, there has been no shortage of mergers & acquisitions rumors. Here’s a look at seven stocks that could be the next takeover targets.
Buyout Rumor: Twitter Inc (TWTR)
Stop the presses — there’s a new Twitter Inc(NYSE:TWTR) buyout rumor. At this point, TWTR shareholders would probably be more surprised if a month passed without a buyout rumor. TWTR shares climbed as much as 4.5% last week on new rumors thatWalt Disney Co (NYSE:DIS) could be interested in a buyout of the battered social media giant.
This time, at least, the source of the rumors is credible. Bloomberg reported on Monday that DIS is working with a financial advisor on constructing a possible deal to buy TWTR.
I’ve long been skeptical that tech giants Alphabet Inc (NASDAQ:GOOGL), Facebook Inc(NASDAQ:FB) and Apple Inc. (NASDAQ:AAPL) would ever pull the trigger on a TWTR buyout. However, DIS makes a lot more sense. DIS and other traditional cable TV companies are struggling with cord-cutting. TWTR has a massive online infrastructure and audience already in place. It’s even gotten positive reviews for its NFL streaming so far this year.
It’s never easy to predict whether buyout rumors will come true. However, this one wouldn’t surprise me.
Buyout Rumor: Gilead Sciences (GILD)
This rumor would be…
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